Indices, also known as indexes, are a measurement of the price performance of a group of securities, derivatives, or other financial instruments that represent and measure the performance of a specific market. An index uses a standardized metric and methodology to measure the price performance of a basket of securities. Indices are often used as benchmarks to evaluate an investments performance against. Some of the most important indices in the U.S. markets are the S&P 500 and the Dow Jones Industrial Average. The construction of indices has evolved greatly, but basic principles of impartiality and transparency remain relevant today. Passive index investing has become a popular low-cost way to replicate the returns of popular indices such as the S&P 500 Index or Dow Jones Industrial Average.
Indices can be traded, and investors can invest in a variety of index-linked products across multiple asset classes and investment strategies. The most traded indices include the DJIA (Wall Street), which measures the value of the 30 largest blue-chip stocks in the US. The Bloomberg Barclays U.S. Aggregate Bond Index is another popular index that tracks the U.S. bond market.
In summary, indices are a way to measure the price performance of a group of securities, derivatives, or other financial instruments that represent and measure the performance of a specific market. They are often used as benchmarks to evaluate an investments performance against and can be traded.
